To hear the big bosses at Exxon Mobil and Chevron, the end of the Iran war won’t bring an immediate major drop in oil prices, much less gasoline prices.
Worse, it’s not clear to Exxon’s Darren Woods and Chevron’s Mike Wirth are how fast the disruptions in the Persian Gulf can be unwound and traffic through the Strait of Hormuz can go back to pre-war levels.
Investors have a different view of matters. Going into the weekend, crude oil prices and energy stocks were falling because of optimism that an end to the U.S.-Iran conflict may be near.
How near or what kind of an end was not clear, but the one bit of news was this: Iran has delivered a new ceasefire/peace proposal to the United States.
According to Bloomberg News, “Iran is ready to continue diplomatic efforts if the Americans change their approach and avoid ‘excessive demands, threatening rhetoric, and provocative actions,’ according to a readout of a call held by Foreign Minister Abbas Araghchi with regional counterparts.”
That was enough to send crude oil down nearly 3% to $101.94 per barrel on May 1. Oil stocks were mostly 1% lower. Exxon was at $152.75. Chevron was at $190.63.
Retail gasoline prices, however, moved up to around $4.40 a gallon nationally, according to AAA Fuel Gauge and GasBuddy. And there have been warnings prices could continue to rise.
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It’s all about the strait
But the reality of the closed Strait of Hormuz remains.
Normally, some 20% of the world’s crude oil and petroleum products pass through the strait every day, the U.S. Energy Information Administration says.
While the United States has adequate enough supplies, Asia is very vulnerable to oil shocks, both CEOs said during their calls.
(So, too, is California, which imports about 77% of its oil.)
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For Exxon and Chevron, big is beautiful
While geopolitical uncertainty is rampant, Woods and Wirth sounded confident their companies, the industry’s largest, were weathering the war’s disruptions. Their operations are scattered around the globe and have been able to adjust and move oil and products where it’s needed.
True, their quarterly profits were down from a year ago, but, in both cases, better than Wall Street expected.
But neither executive was willing to hazard a guess when the war would end. Just that things would take time to fix.
“We’re thinking there’s going to be a 1-to-2-month time lag between the Strait opening up and the market seeing normal flow,” Woods said during the call.
About 6% of Exxon’s production was disrupted by the war, mostly due to missile attacks on a liquid-natural-gas processing operation in Qatar. The attacks took out two “trains,” the facilities that cool and convert natural gas into liquid form. Repairs won’t begin until the strait is reopened.
But Exxon and QatarEnergy have just started to ship liquid natural gas from their Golden Pass LNG facility near Houston. QatarEnergy is a 70% partner on the $10 project.
More trains are coming online in Texas.
David Swanson / Bloomberg / Getty Images
Venezuela is a winner so far
Each had optimistic thoughts on the potential for Venezuela. Chevron has been operating in the South American country since November 2022.
It recently announced it was swapping some producing assets, a move that will concentrate its activities.
Exxon has sent in a technical team to see what the prospects are, Woods said, though he didn’t say what conclusions, if any, they might have drawn. If Exxon would invest there. He did note that Venezuela’s mammoth oil assets are an attraction. He had pointedly called Venezuela uninvestable at a January meeting with President Trump
The oil is a tricky attraction because the oil is generally very thick and requires special processing. Exxon does have experience with that kind of oil from its tar sands operations in northern Alberta in Canada. But developing those resources have been bitterly opposed by indigenous people and environmentalists.
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